This is an enabling measure which when enacted will permit the establishment of free ports generally in the State. While the Bill does not, therefore, deal with any specific location, its primary purpose is to permit of the establishment of a free port at Ringaskiddy, County Cork. There are no plans to establish any other free ports for the moment. May I say Senators will find it very interesting legislation, with very considerable possibilities for the future. I am indeed privileged to have the opportunity of bringing it to this House.
The principal provisions of the Bill are:
Section 2, which enables the Minister for Communications by order to establish or vary the limits of a free port;
Section 3, which enables the Minister by order to designate persons to control and manage a free port;
Section 4, which enables the Minister to grant licences authorising the carrying on of businesses within a free port;
Section 10, which adapts the law relating to customs duties in its application to a free port; and
Section 12, which enables the Minister for Finance to make regulations providing, inter alia, for the necessary customs controls and procedures to apply to a free port.
The origins of this Bill lie in the deliberations of the Task Force on Employment in the Cork Area, which made a number of recommendations in 1984 designed to stimulate economic activity and employment in the Cork region. Among the recommendations was that a free port be established at Ringaskiddy. I will return presently to the arrangements that might be applied to that location, but first I want to indicate the nature and extent of the benefits which it is proposed would be conferred on businesses setting up in a free port.
The financial benefits will derive from deferred liability for customs duties and VAT. In the case of customs duties, the Bill provides that non-European Community goods imported into a free port will only become liable for customs duties if and when they are subsequently placed on the Community market. This is the effect of section 10 of the Bill. Goods originating in the European Community, of course, are in free circulation and are not subject to customs duties on arrival in the State in any event. The benefit of this concession to the cash flow of a particular business will depend, of course, on the nature and extent of that business. An indication of the degree of potential benefit is that the average rate of customs duty is of the order of 10 per cent.
The proposed VAT reliefs are not provided for in the Bill. They will be the subject of separate regulations to be made by the Revenue Commissioners under the VAT Act. The main thrust of the regulations will be as follows. First, a business operating within a free port would be able to import, without payment of VAT, materials, machinery etc. for use in the free port in connection with processing or manufacturing there. Secondly, VAT would be charged at the zero rate on goods supplied within the free port itself. Thirdly, goods entering the rest of the State from the free port would come under the internal VAT system if the subject of a sale, which would normally be the case, and would not then incur import VAT.
Under these arrangements finished consumer goods would not qualify for relief from VAT on importation into a free port nor in general would any other goods imported for resale. As I have said, however, relief would apply to all materials, components, plant or machinery imported for use by a manufacturing or processing concern within a free port. This is the correct approach, I believe, since the purpose of the concessions is to stimulate economic activity and therefore employment within the free port and not simply to divert normal trade from elsewhere in the State. The purpose is to stimulate this extra activity. It is not a question of diverting something which is happening in one place and putting it into another but of generating employment and extra economic activity
Apart from these financial benefits, a free port will also afford some less tangible but nonetheless real and valuable advantages, namely, a concentration of facilities and infrastructure leading to economies of scale, a more secure environment and simplification of customs procedures and documentation. These I expect to be attractive to small firms and to firms which might not otherwise become involved in re-export trade.
I envisage that the initial area to be designated as a free port at Ringaskiddy will be comparatively small. Cork Harbour Commissioners have proposed the designation of a 30 acre site of theirs at Ringaskiddy, which is beside the car ferry terminal and near the deepwater berth which will be completed later this year. The commissioners have proposed that they should develop this site in conjunction with private interests. Another possibility would be the provision and development of a site elsewhere in the area by private interests.
The designated area can be extended by order made under section 2 of the Bill when enacted as the need arises. I envisage the provision of infrastructure being phased in in line with the development of activity in the free port. I might mention that additional areas do not have to be contiguous with the area designated at the outset — for example, a separate area could be designated to cater for servicing needs of offshore drilling activity.
As regards the day-to-day management and control of the Ringaskiddy free port, I am considering a number of options. One of these would involve a joint venture between Cork Harbour Commissioners and private sector partners and this would tie in with use of the commissioners' site to which I have already referred. Private investors, of course, would expect to earn a return on their capital by providing accommodation and facilities in the free port to businesses establishing operations there. Cork Harbour Commissioners are "testing the market" as it were. They have invited potential investors in the free port to submit proposals on the basis of the joint venture approach.
The commissioners have invited submissions to be made to them on or before 21 March 1986. I expect that the commissioners will have evaluated all such submissions sometime after Easter and that they will then put a comprehensive proposal to the Department. This is one way of achieving the sort of local involvement I see as being essential to the success of the free port at Ringaskiddy. Lest I be accused of showing favouritism to the commissioners, I would like to assure the House that I am prepared to consider any proposals for management and operation of the free port at Ringaskiddy.
The designation of a person or persons to operate and manage the free port is just one step towards commencing activity in the free port. Such activity will be subject to the licencing provision of section 4 of the Bill. While full details have to be finalised, the intention is that the operator-Manager of the free port will have a significant role when applications for licences are being considered and evaluated by my Department.
I am aware that free ports in the UK have been slow to develop and that there have been criticisms that the customs regime is too rigid. Here, as in the UK, the free port will be subject to the criteria laid down in EC directives. These are very firm and very definite in most respects. We must remember that to a large extent a free port here is a free zone within a larger customs zone, the European Community. The regime in Ireland must, by virtue of our membership of the EC, be much the same as that applying to the free ports in the UK. Like the free ports in the UK, I do not expect the free port at Ringaskiddy to become an overnight success. With vigorous marketing by the operators I am confident that firms will be attracted to set up in the free port over the next few years.
I would like to stress that the Government's concern in legislating to provide free ports here is to generate additional economic activity. If the free port simply diverts economic activity from elsewhere in the State the concept will have failed. I would also like to point out that the Government have no desire that a free port should be used as a warehousing centre in which imports can be stored pending release for consumption on the home market. If that were to be the case, the free port benefit would merely serve to subsidise the importation of goods and the end result would be to increase the competitive position of imports vis-a-vis goods produced at home. As I have said already, what we wish to achieve is additional economic activity. It is in the light of these factors that applications for licences to carry on activity within the free port will be considered.
It is worth mentioning that there does exist already a number of mechanisms through which firms can suspend payment of customs duties. The inward processing regime exists for non-Community goods. Firms who export a substantial part of their production outside the European Economic Community usually qualify for this regime. A firm which does not at present qualify for inward processing could, if it set up in the free port, qualify for an inward processing type regime and thereby achieve deferment of payment of customs duty.
I am proceeding with this enabling measure now while the options for the particular arrangements as regards development and management of the Ringaskiddy free port are being investigated precisely so as to lend impetus to that investigation. The Minister for Finance, the Revenue Commissioners and I will proceed, on enactment of the Bill, to make the necessary orders and regulations as quickly as possible to bring the Ringaskiddy Free Port into being. Work on the necessary orders and regulations is proceeding.
In the course of my earlier remarks I mentioned the new deepwater berth being provided at Ringaskiddy. The cost of the berth is being met from a State grant of almost £10 million. When the berth is completed next August, it will be capable of accommodating vessels of up to 60,000 tons deadweight. It will, therefore, be the largest common user berth in the State.
As Deputies will be aware, the IDA have a fully-serviced 1,000-acre portside estate at Ringaskiddy. This site and the port at Ringaskiddy, together with industrial estates at Churchfield, Hollyhill and Togher in Cork, have been designated by the Minister for Industry and Commerce as areas which qualify for higher IDA grants than are generally made available. The Government have funded the cost of new infrastructure in the area. This includes substantial processed water supplies, effluent disposal and road improvements. With the completion of the deepwater berth and the setting up of the free port the Ringaskiddy area will, I trust, prove to be a major centre for industrial activity in the Cork area.
The acid test for the Ringaskiddy Free Port will be whether the area initially designated will require to be extended in a few years' time to cope with the scale of activity. Having regard to the extent and scale of the State-financed facilities and assistance for new industry in the Ringaskiddy area, however, I am optimistic that the free port will indeed pass this test. While the free port at Ringaskiddy will not be a panacea for the economic problems of the Cork area, it will, I am confident, be a stimulus for additional economic activity with proper development and marketing.
I commend the Bill to the House.
